subject: Debt Management Plans – What Is A Debt Management Plan And How To Make One [print this page] Plan is an arrangement you make with those you owe money to (ie your creditors), organized and usually run by a debt management company, which allows you to reduce your monthly payments to an amount you can afford. These arrangements are often called informal arrangements' as they are not legally binding. They're generally suitable for people who only really need them for the short to medium term; to cover maternity leave or a loss of overtime for example. Debt Management Plans are designed to manage your unsecured debts, including credit card and store cards, overdrafts and unsecured loans.
How much can I afford?
The amount you pay is worked out by adding up all your monthly bills and reasonable living expenses, and deducting this total from your monthly income. The money left is known as disposable income', which you send to the debt management company each month. They then pay your creditors for you.
Advantages of a Debt Management Plan
Debt Management Plans allow you to start paying creditors with a single, affordable payment each month.
You won't need to try and obtain more credit to pay your debts.
As an informal arrangement they can be used as a short to medium-term solution.
If you get phone calls or letters from your creditors, you can pass them on to the debt management company, who will deal with them for you.
Disadvantages of a Debt Management Plan
Your credit rating (ie your ability to get loans etc in the future) will be affected and, in general, you will be asked not to use your credit cards or other credit while in the arrangement.
As you're paying less towards your debts each month than originally agreed with your creditors, it may take longer to pay back your debts.
Although your creditors don't have to freeze the interest and charges they apply to your debts, they're more likely to do so with a strong case and if you work with a credible debt management company.
Debt Management Plans What Is A Debt Management Plan And How To Make One
